Is child support considered earned income when calculating the earned income credit?

Is child support considered earned income when calculating the earned income credit?

No, for purposes of calculating the earned income credit, child support is not considered earned income.

Examples of items that are not earned income include interest and dividends, pensions and annuities, social security and railroad retirement benefits (including disability benefits), alimony and child support, welfare benefits, workers’ compensation benefits, unemployment compensation (insurance), nontaxable foster care payments, and veterans benefits, including VA rehabilitation payments. Do not include any of these items in your earned income.

Child Support and the EITC

If both parents who were never married want to claim the earned income credit, which parent is entitled to claim the credit as an eligible individual with a qualifying child?

If they otherwise meet all of the requirements to claim the earned income tax credit (EITC), unmarried parents with a qualifying child may choose which parent will claim the credit.

  • If there are two qualifying children, each parent may claim the credit based on one of the children.
  • One parent may claim the credit based on both children.
  • If both parents claim the child as a qualifying child for the EITC, the IRS will apply tie-breaker rules and treat the child as the qualifying child of the parent with whom the child lives for the longer amount of time in the tax year. If the child lives with each parent for the same amount of time, the IRS will treat the child as the qualifying child of the parent who has the higher adjusted gross income (AGI) for the tax year.
  • If no parent can claim the child as a qualifying child, the child is treated as the qualifying child of the person who has the highest AGI for the tax year.
  • If a parent can claim the child as a qualifying child but neither parent claims the child, the child is treated as the qualifying child of the person who has the highest AGI, but only if that person’s AGI is higher than the AGI of any of the child’s parents who can claim the child as a qualifying child.

 

Qualifying Dependents and EITC

Must I be entitled to claim a child as a dependent to claim the earned income credit based on the child being my qualifying child?

You do not have to be entitled to claim the child as a dependent to claim the earned income credit based on the child being your qualifying child. However, the child cannot file a joint return for the year except as a claim for refund of income tax withheld or estimated tax paid. If your qualifying child was married at the end of the year, he or she cannot be your qualifying child unless you meet one of the following conditions:

  • You are entitled to claim an exemption for the child, or
  • The reason you are not entitled to claim an exemption for the child is that you released a claim to a dependency exemption for the child under the special rule for divorced or separated parents or parents who live apart.
For more information, refer to Qualifying Child in Publication 596Earned Income Credit, and Earned Income Tax Credit (EITC).

More Information about Child Support and Earned Income Credit (EIC)

Whenever taxes and child support mix, it is usually a complicated situation. If there is a large sum of money involved, you are almost certainly better off speaking with a professional. For help preparing your taxes and understanding how child support affects your finances, you may consider contacting an experienced tax attorney.